BILL NUMBER: S5600
SPONSOR: MAY
 
TITLE OF BILL:
An act to amend the personal property law, in relation to providing for
a cap on the credit service charge computed and collected on a retail
instalment contract
 
PURPOSE:
To cap the interest on retail instalment contracts at the state civil
usury rate.
 
SUMMARY OF PROVISIONS:
Section 1 of the bill amends section 404 of the personal property law to
prohibit interest on retail instalment contracts from going above the
rate set for civil usury in fourteen-a of the banking law.
Section 2 of the bill states the effective date.
 
JUSTIFICATION:
Installment credit can be beneficial for consumers because it allows
them to take home and use products while they make payments towards the
product's total cash price. However, there are abusive practices within
the industry that are not in the best interests of consumers, such as
exorbitant interest.
In New York, the state civil usury rate is 16% however, this rate does
not apply to installment credit because of the time price doctrine.
Under the time price doctrine a retail installment contract is not
considered a loan and is then exempted from state usury laws. The retail
installment sales act, which governs these transactions, states that the
maximum interest rate that can be charged is whatever rate is written in
the contract and agreed to by the buyer.
This bill curbs that abusive practice by setting a cap on installment
credit interest rates that is equal to the state usury rate.
 
LEGISLATIVE HISTORY
2023-24: S.363 (Thomas) / A.10022 (Dilan)
2021-22: S.7919 (Thomas) / A.8897 (Joyner)
 
FISCAL IMPLICATIONS:
None to the state.
 
EFFECTIVE DATE:
This act shall take effect immediately.

Statutes affected:
S5600: 404 personal property law, 404(1) personal property law